Insurance
T replaced his home's roof five years ago. T suffers a covered loss to his roof which must be replaced. The insurer deems that the roof will cost $10,000 to replace and his old roof depreciated at a rate of $1,000 a year. If T's roof value is based off of Actual Cash Value, how much will T's policy pay to replace the damaged roof?
$5,000
What is the fire department service charge amount paid by a homeowners policy?
$500 with no deductible required
The ACV of dish set is $1,000 before several broke. Now is $400. How much will homeowners policy pay under Loss to a Pair or Set clause?
$600
The maximum number of families allowed to live in a dwelling covered under a homeowners policy is
4
Y has a policy of split limits of 50/100/50. If Y causes loss, what is the maximum amount that each person would receive?
50,000
T's policy is automatically upgraded within 60 days of buying the contract because the insurer broadened coverage for all policy holders. This contract clause is known as:
Liberalization
The state maximum that an insurer will pay on a loss that is listed in the declarations is known as:
Limits of Liability
An unintended, unforeseen reduction or destruction of economic value is known as:
Loss
H has his auto insured with legal minimum coverage. One day H causes an accident in which he harms himself, the other driver and a pedestrian walking down the street. Who is considered an insured under H's contract?
All parties involved in the accident
What reinforces the concept of indemnity?
Pure risk
Statements made by an applicant for property insurance which, in the opinion of the applicant, are true to the best of his or her knowledge are called:
Representation
M owned a factory warehouse that suffered a total loss due to a fire. The insurer discovers that they can scrap some of the metal beams left from the structure to recoup some of their loss paid to the insured. Which method of valuation would allow this to occur?
Salvage Value
An HO-4 will not offer coverage on:
detached structures
DP-3 policy and pays an additional premium for personal liability supplement. What is an example that would be covered under endorsement?
during a party at the house, friend falls down stairs and breaks neck
The responsibility for the insured to prevent further loss of property from damage under reasonable conditions is listed under:
duties of the insured
The responsibiliy for the insured to prevent further loss under reasonable conditions is listed under:
duties of the insured
What peril is covered by HO-3 and Ho-5 policies?
earth movements caused by an explosion
Christopher is issued an insurance policy that contains an attached agreement which alters the terms of the policy. This attached agreement is called a(n)
endorsement
what loss would be covered by extra expense insurance added to the commercial building and personal property from?
extra costs involved in replacing damaged finished stock
Actual Cash Value (ACV) takes usage of property into consideration when an insurer pays a claim so that the insured becomes whole again after a loss. To restore an insured in this manner is known as:
indemnity
What happens when an initial offer is answered with a counteroffer?
inital offer is void
T is applying for a policy and has had many claims in the past on other properties. The agent tells T that based on his past the insurer may want to investigate into T's past claims. This type of report would be known as a:
inspection report
The party of a casualty that is legally allowed to collect on losses whether named or not is the:
insured
What is an example of what is not covered under HO-5 homeowners policy:
insured notices wood shavings in the basement for several years before part of the structure collapsed due to termite damage
all of the following losses are excluded under the Business personal property coverage form, EXCEPT bridges underground pipes crops inventory
inventory
Extra Expense coverage:
it can be purchased separately, or with Business Income Coverage; Idea of extra expense coverage is to avoid or minimize a shutdown period; it is form businesses that may permanently lose customers if temporarily closed
regarding the mortgage cluse
it gives the mortgagee separate rights under the policy
In property policy, the mortgagee is defined as the:
lender
G got computer stolen at coffee shop. H called agent to report under his DP-3 policy. He was covered for theft only on premises. G has:
limited theft coverage
Section I of a Homeowners policy provides
loss of use, personal property of the insured, dwelling and detached structures on the insured premises
An insurance contract may be voided if a misrepresentation found on the application is determined to be
material
Which of the optional coverages Limits the benefit period to expenses occurring within 120 days of the covered direct loss?
maximum period of indemnity
V buys a home and has an idea to purposely set it on fire, but will make the loss look like an accident to collect the benefits from the policy. This is an example of a(n):
moral hazard
G decides that she wants to go to the convenience store and pick up the Sunday newspaper. Upon parking her car, G runs into the store but leaves her car running with the doors unlocked because it is cold outside. This is an example of a:
morale hazard
B owns a home with a Basic Dwelling Policy (DP1) and rents it out to a family. One day, a burglar tries to break into the house causing $2,000 of damage. After submitting the claim, B is informed that since the burglar damage is not covered under the policy, the damage will not be paid by the policy. B's policy is a:
named peril policy
Regarding Business Income Insurance Coverage Extension applicable to new facilities
new facility must be acquired or built at a new location, max benefit period is 30 days, and mx benefit amount is $100,000
Which of the following commercial building and business personal property form perils is covered by the broad form but not by the basic form? sprinkler leakage sinkhole collapse volcanic action weight of snow, ice, or sleet
weight of snow, ice, or sleet
when an insured submits a claim for a loss covered by the Business Income Coverage Form (Business Interruption Insurance), the insurance company basis the amount of lost income
what the continued net income was likely to be if no loss or damage had occurred
Extra expense coverage includes
while J's bar was being rebuilt after the fire, his liquor license lapsed. The expedited late renewal increased J's income loss and extended the period of restoration
D just purchased a warehouse at an auction. When D receives the keys and documents, he arrives at the building to find it completely empty with no people or contents. The warehouse is a:
Vacancy
X and Z own a company that is insured through a commercial property policy. X is the first named insured on the contract while Z is also listed as an insured. If any endorsements need to be made in the contract, who has the sole right to make changes?
X
J has a property that is worth $400,000 and is insured for $400,000 through three different insurers. Company X covers $20,000, Company Y covers, $100,000 and Company Z covers the remaining $100,000. If J has a $100 deductible, how much will each company pay on a $20,000 loss?
X pays 9,950, Y pays 4,975, and Z pays 4,975
When Frank's factory and grounds suffered damaged during an extended labor dispute, His Commercial Building and Personal Business Property policy denied coverage for damage to his
company vehicles
H owns a small restaurant. It catches on fire and business is shut down for 6 months. H loses revenue during repairs. H's loss of revenue because of fire is know as
consequential loss
What is the minimum dollar coverage amount required for basic form coverage in a dwelling policy?
$0
S has personal property with value of about $10,000 in storage space near home. His HO-3 coverage A $200,000. How much will S collect from insurance company when fire destroyed locker?
$1,000
If Algernon purchased business income insurance with the Agreed Value set at $400,000, but only purchases $300,000 , how much will the insurer pay if the income loss is $200,000?
$150,000
Single family dwelling with Special Form coverage with replacement cost coverage equaling $150,000. If their home and garage are total loses, how much will the homeowners policy pay?
$165,000
Which of the following personal property is covered under Coverage C in a homeowners policy?
$180 in pennies owned by the insured that were melted in a fire that struck the covered dwelling
What is max amount payable under additional coverage in a homeowners policy for loss assessment
1,000
H has a policy with a $10,000 per occurrence limit of liability and an aggregated limit of $100,000. How many maximum dollar single claims can H have under a policy before she would hit her aggregated limit?
10
Under a dwelling policy, when will coverage begin?
12:01 am on the date listed in the declarations
HO-8 in landscape coverage limits up to
250 per item
According to the extensions of coverage in a Buisnessowner's Polict, a newly aquired building by the insured is automatically covered for what period of time ?
30 day
for volcanic eruption peril in homeowners policy, you have how long
72 hours
Which of the following situations would be best described as a pure risk? An insured purchasing an HO-6 policy to insure their condo An insured investing money in the stock market An insured purchasing a foreclosed home to rehab and sell for investment purposed An insured who places a wager on a horse at a race track
An insured purchasing an HO-6 policy to insure their condo
T has a Commercial Package policy and wants to know what his rights and duties in the policy will be and what duties and rights the insurer has. J should read the:
Conditions
An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract?
Contract of utmost good faith
Homeowners coverage that provides for loss when the insured dwelling is not habitable due to a covered loss is found in
Coverage D
Under the Settlement Considerations clause of a DP policy, what policy provides dwelling an contents on an ACV basis?
DP-1
what cause of loss form would cover building damage caused by the land shifting due to a Volcano?
Earthquake
An agreement is reached when an insurance contract is formed. Which of the following is NOT considered to be an element of an agreement?
Equity
A has a commercial package policy and would like to know which type of property is not protected against loss under the policy. The part of the contract that A should read is the:
Exclusions for each coverage part
All of the following homeowners forms pay covered loss to an insured structure on a replacement cost basis, EXCPET: HO-3, HO-8, HO-2, and HO-5
HO-5
what homeowner policy is not names peril coverage
HO-5
Which of the following is CORRECT regarding cancellation of a policy? The insurer can cancel a policy and give a short rate refund The insured can only cancel a policy If the insured terminated coverage, the insurer is sometimes allowed to deduct administrative costs for processing cancellation before refunding any premiums The insurer can cancel but must refund all paid premiums on a short rate basis
If the insured terminated coverage, the insurer is sometimes allowed to deduct administrative costs for processing cancellation before refunding any premiums
when a neighboring mine collapsed, a sinkhole on L's manufacturing campus opened up and swallowed part of a storage facility. When L submitted a claim to him commercial property insurer
L's claim was denied
An insurance company insures two million homes under Homeowners coverage and collects $1,500 in premium for each insures. In the next policy year, only 200 homes suffer a total loss. In this event, the insurer still collected enough premium dollars from all insureds to pay the actual losses as well as their overhead and still collected a profit. This is known as:
Law of large numbers
How do insurers predict the increase of individual risks?
Law of larger numbers
Which of the following statements are considered to be NOT true in regards to the restoration/nonreduction of limits clause? N suffered a covered total loss, but N's limits are reduced by 50% following loss payment O's policy was ended and a pro rata refund was issued U suffered a covered loss and there was no reduction on his policy H suffered a total loss on his home and his original policy limits are restored
N suffered a covered total loss, but N's limits are reduced by 50% following loss payment
All of these statements correctly describe an aleatory contract EXCEPT: A legal wager is considered an aleatory contract. Only one party makes any kind of legally enforceable offer. Element of chance is involved. Potential unequal exchange of value for both parties.
Only one party makes any legally enforceable offer
D has a single family home located at a permanent residency. The type of coverage that D has is considered to be:
Specific
B is in a car accident caused by the other driver. B ends up going to the emergency room with minor injuries totaling $5,000 in loss. B's insurance company pays the claim but then seeks to recover losses from the other driver's auto insurance. This is the process of:
Subrogation
A larger business with varied property and casualty insurance needs is likely best served by
a commercial package policy
What losses would be covered by the peril "water damage" as defined in a Commercial Property policy
a hot water pipe supplying the restaurants commercial dishwashers burst and causes a shutdown
what is allowed use of detached garage under terms of coverage b in dwelling policy?
a non-tenant of the insured rents the structure as a private garage
under the Vehicles peril under a HO policy
an insured foot accidently slips off the brake when turning into their driveway and the car takes out half of the homes living room is covered
when Alfred purchased his commercial policy package, several coverage parts excluded the same group of certain computer-related losses. The insurer simplified the policy form by using
an interline endorsement
What qualifies as acceptance of an insurance contract offer?
an issued policy
What is not found in section I and II of homeowners policy?
appraisal
Common conditions of commercial packages policy:
assignment of insured rights is not allowed without the written consent of the insurer, cancellation is allowed by both parties, premiums are the responsibility of the first-named insured
the coverage and premiums included in the commercial package policy or found in
common declarations
Which form lists all the coverage and common forms that apply to all parts?
common policy declaration
F has just opened a clock repair shop in his hometown. While F has his client's clock in his care, custody, and control creates a legal relationship called a:
bailment
When a windstorm caused significant damage to the roof of an equipment shed on the company's insured premises, the insurance company covered the damage under the terms of which portion of the policy?
buildings
What is a loss covered under a businessowners policy that will require the insured to pay a deductible?
business personal property temporarily in portable storage
The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a(n)
contract of adhesion
the increased cost of construction additional coverage found in a commercial building and business personal property form benefits the insured when:
costs to repair or replace a covered loss are higher due to a building code upgrade put into effect before the loss happened, which had not yet been complied with by the insured
Homeowners coverage that provides for loss when the insured dwelling is not habitable due to covered loss is found in
coverage d
The part of a homeowners policy that will pay the medical expenses of an injured person when the insured is not legally liable to pay but feel a moral responsibility is
coverage f
the coverage extension, "valuable papers and records" (other than electronic data) extends
coverage to the cost to pay the cost to research and reproduce or restore valuable paper or records
money awarded to an individual when a negligent party is liable for loss?
damages
which homeowner policy does not include construction
ho-4 (renters)
P was in an accident that was caused by another driver. P's injuries were so serious that they have cause him much pain and suffering. Which type of damages can P collect for the mental pain and suffering he has incurred?
general
A commercial package policy must:
have at least two coverage forms
An event or mindset that greatly increases the change that a peril will actually occur is known as
hazard
In 2007, T opened up a small office business which had three employees. At the time, he paid minimal premiums for Workers' Compensation because he had little salaries paid. In 2011, the insurer decides to audit T's books for the 2007 fiscal year to see if they charged too little in premiums for that year. What is most likely to occur under the Deposit Premium/Audit provision? None of the answers T's premium will increase T's will have to give a deopsition T's premiums will decrease
none of the answers
A policy that will cover any specific immediate losses unless they are excluded in the policy for coverage is a:
open peril
All of the following are additional coverages under Section II of a homeowners policy, EXCEPT: first aid expenses claims expenses personal injury
personal injury
L is reading over his property policy and the contract states that coverage begins May 1, 2019 and ends on May 1, 2020. The provision in the contract that would state this information would be:
policy period
X owns a semi-truck transportation company and has limits on where the property is covered or not covered depending on specific geographic location. This clause is known as:
policy territory
What is an example of what would be covered following falling objects causing loss covered by homeowners Broad form policy (HO-2)
propeller of a helicopter falls from the sky, crashed through roof of insured home destroying dining set
insurers do not use exclusions in a commercial package policy for
showing when the coverage ends
The fair credit reporting act:
states that permission must be granted in writing from the insured for the insurer to obtain reports from outside sources
Hidden decay caused wall of garden supply firm's equipment hanger to collapse, the falling structure hit a fuel storage tank, and the fire burned down the nearly the nearby green house. How much of the damage was covered by the company's Commercial Property Policy with a Basic Cause of Loss Form?
the fire damage to the greenhouse
Under the Mortgagee Rights:
the mortgagee must pay any due premiums when they are required to
Which of the following is not included in the insuring clause? whether coverage is open or named peril the insurer must be fair in underwriting the name of the insured the promise that the insured must pay timely premiums
the name of the insured
if more than one commercial policy package includes a commercial property coverage part that applies to the same insured loss, then
the policies cover the loss on a pro-rata basis
H has commercial policy covering his warehouse. During the application, H told the insurer that he guaranteed that smoke detectors where installed and functional in the building even though the warehouse does not have smoke detectors. H's untrue statement of functional smoke alarms would be considered to be:
warranty
Which of the following statements regarding a warranty is CORRECT? it is a failure to disclose an immaterial fact they are statements which are true in the opinion of the person making them they are statements which are supposed to be absolutely true they include mutuality of assent
they are statements which are supposed to be absolutely true
B has a live-in maid who gets hurt while shopping at the grocery store after driving there in one of B's auto. The maid can collect for her bodily injury:
through B's personal liability coverage under his homeowner's policy if B lives in a state that does not require workers compensation for domestic employees
When talking about Business Income Insurance, what benefit does Interruption of Computer Benefits coverage provide?
up to $2,500 if one of the covered broad forms perils causes a data loss resulting in the interruption of business
what loss is covered by a commercial property policy with the special causes of loss form?
water damage is caused by a leaking pipe that froze despite efforts to maintain heat during an extreme cold snap
The following are all elements of a valid contract EXCEPT consideration competent parties offer and acceptance written evidence
written evidence
the insured has a DP-2 Broad form and has experienced a loss of 25,000 in cash stored in the mattress that was destroyed by fire. If the insured has a replacement cost coverage of 200,000 what is the total amount the insurer will pay for the lost money?
$200 without the deductible
An insured has a Basic Dwelling policy with a replacement value of $100,000. To save money on premiums, the insured decides to insure the property for $40,000. If the insured suffers a $10,000 loss, how much will the insurer pay?
$5,000
what is the main difference between HO-3 and HO-5
HO-5 has open peril coverage on personal property and HO-3 does not
J has a policy on his home that protects against almost all losses. J suffered a terrible loss to his home that caused several thousands in claims. J's insurer notifies J that because of all the claims that were paid , they are discontinuing coverage at the end of the policy period. J's policy has been:
Nonrenewed
M has a two policies covering the same exact losses, however, one policy is first dollar coverage and the other is secondary. M has a loss that occurs that falls between the gaps of the policy and is not covered by either of the policies. M has:
Primary and Excess
People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called
adverse selection
which of the following is true regarding the loss payable clause? the loss payee is a third party if a policy is cancelled, the loss payee is also entitles to written notice by the carrier all the answer listed the insured can pay loss to a third party who possesses an insurable interest in the property who is unsured
all the answers listed
An insured buys a used car from a local dealer. Upon purchase, the insured calls her agent immediately in which the producer tells the insured that she is covered against loss until the policy is issued or declined. The agent gave:
binder
Section II of a homeowner's policy provides
both personal liability and medical payments to other coverage
Which would not be excluded under DP-3? burglary of a property that was vacant for 30 days loss due to domestic pet wind damage to landscaping
burglary of a property that was vacant for 30 days
The insurer's obligation to pay a claim depends on whether the insured or beneficiary has complied with all policy conditions. This makes the policy a(n)
conditional contract
An insured doctor believes that the doctors malpractice insurer is willing to pay a claimant an unreasonably large amount of money to settle the claim. Which of the following clauses in the Professional Liability policy requires that the insurer obtain:
consent to settle a loss
Which of the following is considered to be an event or condition that increases the probability of an insured's loss?
hazard
The six-year old child of the insured has an age appropriate remote control toy police car that is destroyed be a covered peril under his parents HO-2 policy. The toy police car
is covered as is any toy vehicle designed for a child under age seven
A certificate of insurance:
is proof that a policy was issued
Regarding cancellation of a policy:
is the insured terminated coverage, the insurer is sometimes allowed to deduct administrative costs for processing cancellation before refunding any premiums
J has a policy on his home that protects against almost all losses. K suffered a terrible loss to his home that caused several thousands in claims. J's insurer notifies J that because of all the claims that were paid, they are discontinuing coverage at the end of the policy period. J's policy has been:
nonrenewed
Replacement cost:
provides benefits that are the exact amount of money to replace destroyed property at the time loss occurred
B has a warehouse. One day a customer is injured on premises. B's policy covers the loss, he contends the customer smelled of alcohol he feels they should be responsible. The case goes to court and B must go to give a deposition in which his policy will cover his loss of income for the day of work he misses. This is an example of a:
supplementary additional payment
Section II of a homeowners policy covers which of the following activities of the insured?
the insured is in a hurry and accidentally rams a shopping cart into an elderly women, injuring her
Insurance represents the process of risk
transference
Giving up a known right on a voluntary basis is called a(n)
waiver
